A Personal Journey into the World of Microfinance

A Change in Journey Demands . . .

noreply@blogger.com (Howard Hunchak) — Sun, 20 Jul 2008 20:36:00 +0000

A change in journey demands . . . a change in blogs: becaorg.blogspot.com.

The Journey Changes

noreply@blogger.com (Howard Hunchak) — Mon, 07 Jul 2008 23:16:00 +0000

I mentioned in my last blog entry that I am working on a new project, but I wasn't quite ready to share.

I am ready to share.

Preamble:

While working here in Nicaragua -- yes, I am still here! -- I came across a group of young people who wanted to learn about computers, but had no money.

When I investigated, I found that a three month computer course was cheap -- about $75 USD.

Kiva.org crossed my mind. (Kiva allows people to sponsor micro-entrepreners via their website.) Why not kiva-ize education?

In this manner, www.beca.org was hatched.

It is still WAY TOO early to get excited. But the first group of students (above - your loyal correspondent in the center), graduated in April with flying colours (below - teacher Irma in the center).

The idea is to partner with local technical schools who offer administrative services, in exchange for receiving students. Potentially, this will keep administrative costs low. In the first pilot of BECA.org (January - July, 2008), 47 students received "scholarships" to study computers, dress-making, business cashier, etc.

Pilot #2 is now underway.

I hope you continue to follow along.

RIP: Microfinance and Me

noreply@blogger.com (Howard Hunchak) — Sat, 08 Mar 2008 21:35:00 +0000

It's official.

I've made the decision to step away from Microfinance and focus on something different.

My goal -- since day 1 -- was to find some way to "give back." My journey into the world of Microfinance has been interesting, educational, adventurous and . . . frustrating.

The question that I found myself asking over and over: "How can I make a meaningful difference in Microcredit?" I couldn't come up with anything tangible or substantive.

I have faced two major obstacles:
#1) My spanish has not been good enough.
#2) The institutions I have spent time with have not been very open with me.

Moreover, and perhaps more importantly, I was not thrilled about the impact Microfinance was making.

I still believe Microfinance institutions have a role to play in development. However, I am not going to be involved -- at least not directly.

So now what? Well, I have come up with something . . . but I'm not ready to tell you just yet.

Sidetracked from Microfinance

noreply@blogger.com (Howard Hunchak) — Tue, 29 Jan 2008 15:18:00 +0000

A personal journey AWAY from the world of Microfinance?

This is the situation I am finding myself at the present time. As of this date (1-29-08), I have spent about 8 months with two different Microcredit institutions in two different countries (Ecuador, and now, Nicaragua).

I acknowledge that my experience has been limited to two organizations in Latin America, but, frankly speaking, I have not seen ANY evidence that Microfinance effectively combats poverty.

And this was my initial interest . . . to give back.

Without question, the extension of Microcredit does appear to help some. Generally speaking, these are people above (and, occasionally "at") the poverty line. Usually they have some form of collateral.

I also see where the liberal extension of Microcredit can be harmful to some -- kind of like credit cards, in the so-called "developed world."

I have not completely dismissed Microfinance.

However, I report to you that I remain unconvinced.

Well, What about Microfinance in Masaya, Nicaragua?

noreply@blogger.com (Howard Hunchak) — Thu, 20 Dec 2007 16:05:00 +0000

I have spent my blog posts ignoring Microfinance, for the most part.

I realized this morning that this is a bit odd, especially considering that my diary is entitled "A Personal Journey into the World of Microfinance."

Morever, I am here in Nicaragua to work in a Microfinance institution ("Alternativa"): to gain more exposure, to gain more experience, to (hopefully) gain more insights into the ins and outs of Microfinance in the "developing" world.

Alternativa is a relatively small "Microfinanciera." (The picture above gives you a little idea.)

I have been evaluating the work processes within the institution and interviewing staff members with the objective of making suggestions to streamline various administrative procedures. I am about half-way through the project. (I am scheduled to leave 9 February 2008).

I will only say this: it hasn't been easy.

More "Folksy" Charm

noreply@blogger.com (Howard Hunchak) — Mon, 19 Nov 2007 17:53:00 +0000

I felt bad taking this picture . . . but I just couldn't resist.

Yes, above is Granada 's version of a hearse. A procession of about 50 people, on foot, followed the carriage as it made its way through town to the cemetery.

The untold beauty of tradition.

Often, living in this area is like stepping back in time.

Masaya - Not All Doom and Gloom!

noreply@blogger.com (Howard Hunchak) — Fri, 16 Nov 2007 15:10:00 +0000

In no real order: "taxista", festival time, Masayan house party, "cow tongue."

I'm sure you can figure out which is which.

Masaya: A Little Depressing

noreply@blogger.com (Howard Hunchak) — Tue, 13 Nov 2007 20:58:00 +0000

Let's be frank. Nicaragua is not doing so well.

In my life, I have had the good fortune to visit quite a few countries around the world. Granted, most have been "developed" countries (e.g. Japan, Belgium, etc.)

However, along the way, I have visited some "developing" countries too.

Nicaragua, by far, has been the most depressing. People around here just don't have too many good things to say. And the faces . . . so long and drawn.

Like in Ecuador, I don't see any people actually starving. However, the ambience here in Nicaragua is downright dreadful.

The media sure isn't helping. Case in point: La Prensa - the leading national newspaper. Day after day, the attacks on Government leadership continue unabated. Want to read some good news? Look elsewhere. It won't be found in this periodical.

I went to a pizza place for lunch today. "How's business?" . . . "Scary" came the reply a few seconds later.

Let it known, however, that on the weekend, I did receive one exuberant, positive reply to my regular "How's biz?" query.

He was a loan shark.

Two Weeks in Nicaragua

noreply@blogger.com (Howard Hunchak) — Fri, 26 Oct 2007 16:12:00 +0000

Two weeks have passed and it is time for an update for my loyal readers -- yes, I mean you Mom. (jajajajajaja)*

First impression: Nicaragua is LOADED with foundations, NGO's, charitable organizations and a potpourri of do-gooders. "Development" is an industry here. It employs a lot of people -- which I reckon is not a bad thing.

Inevitably, I see severe lapses in efficiency. But I think that is understandable.

In this town of about 150,000 inhabitants, I can count at least 17 active, microfinance institutions!

Alternativa (my "microfinanciera") has a a portfolio of about $300,000 USD, and 1200 clients. I can't tell you too much more about the operation. I hope to spend more time with the 3 "promoteras" (bank promoters) in the coming days. I'll know more then!

*Spanish Laugh

And now . . . Nicaragua!

noreply@blogger.com (Howard Hunchak) — Sun, 14 Oct 2007 18:21:00 +0000

I´ve decided that I need more exposure to Microfinance and Microfinance. Ecuador was a good start.

Let´s see what Nicaragua has to offer. I´m in Masaya. I arranged another "internship" through FSD to work for a couple of months (at least!) with Alternativa. They are a MFI (Microfinance Institution) here in Masaya. At present, they don´t have a website, but you can read FSD´s description about them here.

I arrived here on Tuesday -- that is, 9 October 2007, or 5 days ago.

I´ve only spent one day at the organization, so I really can´t tell you much yet. The town (about 150,000 inhabitants) is quite the mess.

The town is without electricity daily from 7am to 2pm. Additionally, the water is shut off (rationing?) from 7pm to 9:30pm everday.

So . . . just the perfect place to learn about development, huh?!?!?!?!

Let the learning begin!

Two weeks in Paradise (i.e. Canada)

noreply@blogger.com (Howard Hunchak) — Mon, 24 Sep 2007 18:28:00 +0000

Edmonton, Alberta, Canada is the name of the place.

Talk about "reverse culture-shock."

After spending 5 months in a "developing country," I'm back in Edmonton to visit my parents and sister (and her family) for two weeks. For the most part, Canadians are very rich. Lots of fancy automobiles, fancy clothing and fancy infrastructure (sport facilities, public buildings, park space).

The headlines in the daily newspaper tell it all. No serious problems here. Ecuador feels so very, very far away.

The feeling I get is that these people have no idea how good they have it. But I could be wrong. Perhaps it is simply a case of overreaction - like Erin -- a friend of the family -- tells me.

Regardless, right now I think that Canadians need to know more about poverty in the world. I'm trying to keep my mouth shut for the time being and trying not hard not to be too disgusted by the relative decadence of this place.

My Ecuatorian Internship Ends

noreply@blogger.com (Howard Hunchak) — Thu, 13 Sep 2007 16:21:00 +0000

That´s it.

I leave Ecuador tomorrow and I´m having a hard time coming up with words for this blog entry.

The bottom line: as far as I can tell there is no EXTREME poverty in this country. There are definitely many poor* people .

(*Aside: I no longer like the term "poor" . . . in english, to me it has such a negative connotation. Here, they often use the term "personas con recursos escasos" -- people with scarce resources -- much better, but that is a mouthful in english.)

Does that mean one should look elsewhere for development projects? To Africa, for example, where people are dying from hunger daily? At this point, I really don´t know. It is the issue at the front of my mind at this point in time.

I have decided that I have to see more Microfinance in action before I dismiss it as a tool that can help the "poorest of the poor." I´m inquiring about volunteering in Nicaragua come October.

My biggest disappointment here in Ecuador? That is easy. My spanish. I have struggled on a daily basis trying to understand, trying to communicate, trying to speak with some modicum of fluency . . . but it has been really tough.

My biggest joy? Two things come to mind:

1) My host family has been an absolute joy to live with. Such warm, decent, friendly, kind people. I will miss them dearly.

2) Witnessing the wonderful broad smiles of the "socias" (members of the Banco Comunales) in "el campo" (the country). Absolutely heartwarming stuff! These ladies work extremely hard, with their bare hands, from dawn ´til dusk everyday with and often without the men in their lives. Despite the hardship, they find a way to smile, laugh and, I believe enjoy the happy moments in their lives. One of these moments often happens to be the Banco Comunal meetings -- which offers them a tiny break from their day.

Yes, their beautiful, awe-inspiring gold-toothed smiles. I will never forget it.

Field Trip

noreply@blogger.com (Howard Hunchak) — Tue, 28 Aug 2007 16:00:00 +0000

The office of Pastoral Social in Ambato -- where I have been interning -- closed for two weeks in August for vacations.

What to do?

Pastoral Social belongs to a network of four organizations (all closely affiliated with the Catholic Church) that are involved in Microfinance in Ecuador. All four more or less follow the village banking model. I asked to be "shipped" to one of the other institutions for the two week period.

My wish was granted by my supervisor, Mario Moreno, and off to Santo Domingo de los Colorados I went.

Santo Domingo is five hours (by bus) west of Ambato. It is considered to be part of the coastal region of Ecuador (eventhough it isn't on the coast!).

Orlando was my host/boss for my two weeks. Muy amigable (very friendly!).

Basically, the operation runs the same as Ambato, with a few subtle differences. For example, Santo Domingo is considered less "secure" so they don't use cash. The members have to deposit their payments in a bank, and receive checks at the time of loan delivery. Also, there appeared to be less of an emphasis on evangelization and health issues. The result is that the meetings take less time. (Meeting length is often a sore point for bank members in Ambato -- where meetings can run well over 2 hours.)

Did I learn anything new? Frankly, not really. But I did visit more village banks. I saw another part of the country and . . . took another step in my journey in "developmentland."

Five weeks to go in the Internship

noreply@blogger.com (Howard Hunchak) — Tue, 07 Aug 2007 15:39:00 +0000

My goal in coming here to Ecuador was simple. I wanted to experience and see and feel and expose myself to as much "Microcredit" as I could get my hands on. I wanted to see what happens in the field. I wanted to see how a Microcredit institution works. I wanted to meet the clients.

Of course, more deeply, I wanted to see if Microfinance holds any possibilities for me in the future.

Right now, I would say my experience has been mixed. So far, I have definitely seen how village banks (i.e. Bancos Comunales) work in the field. [Village Banking is one "area" of Microfinance. Other areas are "individual lending" and "solidarity groups." I haven't received any exposure to these latter two types.]

I have attended at least a dozen meetings of different Banco Comunales -- some rural, some in the city. Unfortunately, I am not seeing much of the "back-end" of the operation. Ideally, I would like to see more of the administration.

I am aware that it is probably unreasonable to expect to walk into an organization for three months and expect to be shown everything inside and out.

Let's see what my last five weeks in Ecuador brings . . .

What does a Village Bank look like?

noreply@blogger.com (Howard Hunchak) — Fri, 03 Aug 2007 19:10:00 +0000

Here are pictures of two Village Bank groups here in Ecuador.

The "senoras" meet once a month -- usually to make payments on their loans.

The members are usually quite shy and reticent. Nevertheless, they are always polite and patient with my "espanol."

Banco Comunal San Pedro

Banco Comunal Luz de Santo Domingo

Getting Personal . . . The Journey Shifts

noreply@blogger.com (Howard Hunchak) — Sun, 15 Jul 2007 19:01:00 +0000

Somewhere along the way I chose the path I’m walking right now. I decided that I was going to stop taking and start offering. I saw clearly that I had lived my live selfishly.

Yeah, sure . . . I knew about those poor children dying in Africa -- everybody knows about them -- but who really stops for a minute and actually thinks about it? You know … to really think about the meaning of war, poverty and injustice? It took me 40 years to start thinking about it.

Yes, it took me a long time, but I’m slowly opening my eyes to the misery of the world.
And now I think that the spoiled life that I lived before was an introduction and a process of growing into the person that I have become. Everything that I was and everything I have experienced was a preparation for this moment.

These words sound honourable, don’t they? Well, that’s not what my search is about. I’m searching for the knowledge, the experience in the field so I can use it practically to help other people. I have been looking for some insights into Microfinance to determine if it is an appropriate vehicle for my journey. I am still not sure, but that is completely besides the point.

To my pleasant surprise, during these days, I have learned something that is not really related that much to Microfinance. A good percentage of Ecuador´s population lives in the “campo” (rural areas) and here in Ambato I have been in touch with them almost every day.
The “campesinos” are very poor and are extremely hard workers. They look at you with their wide brown eyes, with looks that are so deep, so penetrating. They also have the sweetest smiles I ever seen. When I look at them, at these people and at their tender and tired smiles, yes, I realize that this search for knowledge is very much worthwhile.

I have seen people with limited resources before, but now I feel that I have a much greater "feeling" for what poverty is all about. The campesinos of Ecuador have such limited opportunities in the world . . . so it is truly astonishing that these people can actually have smiles with so such depth and dignity.

In this manner, Microfinance has taken a back seat in my journey to something more important.

This journey has become about making a small difference, period.

Ecuador Microcredit: The Intern Arrives

noreply@blogger.com (Howard Hunchak) — Mon, 09 Jul 2007 16:35:00 +0000

Today marks the one week anniversary of my time in Ambato.

The first week has been interesting.

A quick summary: Pastoral Social is the social arm of the Catholic Church here in Ambato, Ecuador. I am working with a division that supports and funds "Bancos Communales." The Bancos are groups of (primarily) women, that borrow funds individually. The group as an entity guarantees repayment. Groups range in size from 25 to 50 partners. Loan repayment terms are usually 6 months. The first loan is about $100 and the size of the loan increases every six months. Every group meets for repayment every four weeks.

I have visited 5 different "Bancos" in my first week and will continue to visit more this week.

In my next post, I will share my initial impressions on how Microcredit works via the Banco Communal system here in Ambato.

Internship Countdown - 7 Days to go

noreply@blogger.com (Howard Hunchak) — Sat, 16 Jun 2007 17:03:00 +0000

My time in Quito is now winding down. I have one week left here . . . with my 7 hours of Spanish every day.

Microfinance is in the news quite a bit here in Ecuador. In fact, it is an interesting time to be here. The federal government is trying to pass a new banking law. There are provisions in the proposed law that have implications -- and serious ones -- for the Microfinance/Microcredit community.

Most importantly, the government is proposing to impose a limit on interest rates. Generally speaking, Microcredit organizations HAVE to charge higher rates. Why? Well, there are many reasons, but the main one is that it is just as expensive to administer a loan of $200 as it is to administer a loan of $20,000. A Microcredit portfolio is much more expensive to manage.

Suffice to say that things should be interesting.

I Miss San Jose

noreply@blogger.com (Howard Hunchak) — Mon, 28 May 2007 21:22:00 +0000

In my last posting, I may given the impression that Quito is some how "better" than San Jose.

For the record, I want to emphasize that it isn't the case AT ALL!!

San Jose -- for the time being, at least -- is my home. I have a casa (albeit tiny) there, after all.

I miss . . .

1) Fitsimons gym
2) Castro's Salsa club
3) Cristina, Marco, Alma
4) Pescado entero at "La Princesa Marina"
5) Super cheap cinema
6) The awesome climate all year round
7) La Nacion - an excellent daily newspaper
8) The Bournes
9) The "super amigable" nature of Costa Ricans
10) Did I mention Cristina, Marco & Alma?

So there you have it.

31 Days of Quito

noreply@blogger.com (Howard Hunchak) — Sun, 27 May 2007 23:41:00 +0000

31 Days of Quito . . . 13 quick impressions.

1) Quito is on the equator IN SPIRIT ONLY. Bring a sweater if you are interested in visiting.

2) Ecuatorians are shorter than Costa Ricans.

3) The best deals: lunch and DVDs. Both cost around $1.50.

4) These people seem to like instant coffee. I haven´t yet figured out why.

5) This is the place to go for Spanish instruction. Professional one-on-one instruction ranges from $6.00 to $9.00 per hour.

6) Quito´s "centro historico" is breathtaking and humiliates anything San Jose has to offer.

7) Drivers are more conscientious. They actually pay attention to the traffic signals.

8) Internet cafes are plentiful. It could be because Ecuador has the lowest Internet penetration in South America -- something like 10% of the population has access to the Internet.

9) Quito mornings are clear, blue and amazing.

10) The geography reminds me a lot of Costa Rica. Volcanoes, hot springs, rapids, etc.

11) Did I mention it is colder than I expected?

12) It is easy to lose your breath. I still get wheezy climbing stairs.

13) Ecuadorians are conservative and more reserved than their Costa Rican counterparts.

Back on Track in Ecuador

noreply@blogger.com (Howard Hunchak) — Sat, 19 May 2007 15:21:00 +0000

After an unexpected four month detour on my "journey," I´m back in the saddle again here in Ecuador.

Why Ecuador?

Before venturing out with my own little microfinance project, I desperately need practical experience to complement what I learned in Brussels.

Via the Internet, I came across Foundation for Sustainable Development, based in San Francisco. Basically, their mission is to help students (and professionals) gain development experience. They do it by finding internships with organizations abroad.

I inquired about Microfinance opportunities in Latin America. After a little "back and forth," I have secured an internship with an organization in Ambato, Ecuador that has a Microfinance division. (Microfinance geeks can see more information about UCADE Ambato here. )

At this point, I really don´t know too much about my responsibilities, except that I have to report to them 24 June 2007. The duration of the internship is three months.

Until then, I´m in Quito feverishly trying to improve my spanish.

Coming soon: my thoughts on Quito (and Ecuador!).

Bye Bye Brussels

noreply@blogger.com (Howard Hunchak) — Sat, 23 Dec 2006 13:21:00 +0000

Okay, the first speed bump in my personal Microfinance action plan has arrived.

I have to leave Belgium and say goodbye to the European Microfinance Program -- half way through.

I will spare you most of the boring details, but suffice to say that Belgium has a reputation for its bureaucracy and national immigration is a classic example. Anderlecht, the local municipality in Brussels in which I resided, failed to extend my student visa in time for Christmas. As a result, if I was to return to the program in January, 2007, there would be a risk -- albeit small -- that my reentry would be denied.

It is disheartening to leave, yes . . . but not exactly the end of the world.

Here's why.

1) I received a sound theoretical introduction to the field of Microfinance, receiving exposure to no less than 8 professors/lecturers in the three months I was there.

2) I made contact with experts. For example, Professor Marc Labie was encouraging and enthusiastic. Professor Loïc Sadoulet was also responsive.

3) I met some very interesting and motivated classmates. Over time, this could prove to be the richest resource of all.

What's next?

I will return to Canada for the Christmas season, spend time with my family (Mother, Father, Sister and her family) and contemplate my future and what is next in my "personal journey into the world of Microfinance."

"When one door closes, another opens, but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us."
-- Alexander Graham Bell

Microfinance is Hard

noreply@blogger.com (Howard Hunchak) — Tue, 05 Dec 2006 15:16:00 +0000

Microfinance is trendy.

Microfinance is sexy.

Microfinance is popular.

BUT . . . Microfinance is anything but easy.

In fact, according to Professor Loic Sadoulet, "Microfinance is HARD."

Professor Sadoulet paints a bleak picture for someone like myself who is thinking of jumping into the field head first. The numbers speak for themselves. According to Professor Sadoulet, in a universe of more than 10,000 Microfinance Institutions (MFIs) worldwide, only a relative handful (100-200) are self-sustainable. Only 1 - 2 % of all MFIs can support themselves independently!

The vast majority -- the other 98% -- require handouts (grant money, foundation money, government money, etc.) to keep operating.

Interestingly enough, this is not unlike what Professor Marc Labie had to say in his course earlier in the program. In fact, he went as far to say underinformed Microfinance donors and philanthropists can actually cause more harm than good.

So, what's a keen Microfinance neophyte like myself to do? Should I give up and focus my energies elsewhere? Does Microfinance belong on the "Good idea, but . . . " shelf?

Hmmmm.

Not just yet.

Sometimes jumping in head first is what one has to do.

Review of BlueOrchard Presentation in Brussels

noreply@blogger.com (Howard Hunchak) — Tue, 28 Nov 2006 13:59:00 +0000

Last Thursday (23 November 2006) our class was invited to attend a lecture on campus by Jean-Philippe De Schrevel, founder and Managing Director of BlueOrchard Finance. According to their website, BlueOrchard specializes "in the management of Microfinance investment products." Basically, their mission is to set up and manage Microfinance "mutual funds."

I was curious to see what Mr. de Schrevel would have to say about the social component of his firm's activities. What was more important to his firm . . . financial profits and returns or alleviating global poverty?

It should come as no surprise -- or should it? -- that it was profits. Generally speaking , I understand completely and I have no problem with companies seeking financial returns at the hands of the world's financially disenfranchised. After all, it can be argued that the poor can benefit in the process (e.g. more opportunities, cheaper capital, empowerment).

What I don't like is when companies like BlueOrchard "play the poverty alleviation card" as a means of securing the funds of socially-driven investors.

Mr. de Schrevel was quite proud of his company's track record of making 384 investments in Microfinance institutions (MFIs) without one single default. Is this really something to be proud of? It is obvious that BlueOrchard is only investing in top-tier, elite MFIs. They aren't really pushing the envelope, are they?

Again, nothing really too wrong with that.

As Professor Marc Labie mentioned in class on numerous occasions: "A bank is a bank is a bank."

What do Microfinance Students Look Like?

noreply@blogger.com (Howard Hunchak) — Tue, 21 Nov 2006 22:05:00 +0000

Now you know.

European Microfinance Program, Class of 2007.

Taken 11-14-06 by Olumayowa Ajetunmobi